Chapter 8

Global Management

©2004 by Nelson, a division of Thomson Canada Limited

1

What Would You Do?
Wal-Mart’s International Strategy
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©2004 by Nelson, a division of Thomson Canada Limited

dominant retailer in Canada and USA major global competitor is Carrefour which countries should Wal-Mart enter? what impact will free-trade agreements have?

2

What Is Global business?
After reading these next two sections, you should be able to: 1. describe the impact of global business on Canada 2. discuss the trade rules and agreements that govern global trade
©2004 by Nelson, a division of Thomson Canada Limited

3

Impact of Global Business
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Foreign direct investment Global competition Multinational corporations

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4

Regional Distribution of Inward Direct Foreign Investment
Region United States European Union Asia-Pacific Latin America All Other Percent 72 19 5 2 2
5

Adapted from Exhibit 8.1

©2004 by Nelson, a division of Thomson Canada Limited

Regional Distribution of Outward Direct Foreign Investment
Region United States European Union Latin America Asia-Pacific All Other Percent 52 19 19 6 5
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Adapted from Exhibit 8.2

©2004 by Nelson, a division of Thomson Canada Limited

Multinational Corporation
Multinational Corporation

corporation that owns businesses in two or more countries country where product is made and assembled Home country where headquarters is located
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Country of Manufacture

Country of Origin

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Trade Rules and Agreements

Trade barriers Trade agreements

©2004 by Nelson, a division of Thomson Canada Limited

8

Trade Barriers
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Tariff Nontariff
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quotas voluntary export restraints government standards government subsidies Customs valuation/classification
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©2004 by Nelson, a division of Thomson Canada Limited

Trade Agreements
General Agreement on Tariffs and Trade (GATT) Regional Trading Zones
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Maastricht Treaty of Europe NAFTA FTAA ASEAN and APEC
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©2004 by Nelson, a division of Thomson Canada Limited

GATT
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Worldwide trade agreement Designed to reduce and eliminate tariffs and subsidies Protect intellectual property

©2004 by Nelson, a division of Thomson Canada Limited

11

Maastricht Treaty of Europe
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Now 15 member countries Created the European Union Facilitate trade among members The currency is the “Euro”

©2004 by Nelson, a division of Thomson Canada Limited

12

North America Free Trade Agreement (NAFTA)

Canada, United States, & Mexico Liberalizes trade among these nations Eliminates tariffs and barriers

©2004 by Nelson, a division of Thomson Canada Limited

13

Free Trade Area of the Americas
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Proposed agreement Unite 36 countries in North and South America Negotiations to finish by 2005

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Association of South-East Nations (ASEAN) and Asia-Pacific Economic Cooperation (APEC) ASEAN  Indonesia, Thailand, Philippines, Malaysia, Singapore, & Brunei APEC  Canada, United States, Japan, South Korea, Australia, New Zealand, China, Taiwan, Hong Kong, & ASEAN members
©2004 by Nelson, a division of Thomson Canada Limited

15

Learning Objectives: How to Go Global
While there is no magical formula to answer these questions, after reading these next two sections, you should be able to: 3. explain why companies choose to standardize or adapt their business procedures 4. explain the different ways that companies can organize to do business globally
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©2004 by Nelson, a division of Thomson Canada Limited

Consistency or Adaptation?
Consistency  A multinational corporation runs its offices, plants, and facilities in different countries under the same rules, policies, and procedures Adaptation  Multinational corporations modify standard operating procedures to adapt to local differences
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17

Forms for Global Business
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Exporting Cooperative contracts Strategic alliances Wholly owned affiliates Global new ventures

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18

Learning Objectives: Where to Go Global
After reading these next three sections, you should be able to: 5. explain how to find a favorable business climate 6. discuss the importance of identifying and adapting to cultural differences 7. explain how to successfully prepare workers for international assignments
©2004 by Nelson, a division of Thomson Canada Limited

19

Finding the Best Business Climate
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Positioning for growing markets Choosing an office/manufacturing location Minimizing political risk

©2004 by Nelson, a division of Thomson Canada Limited

20

Positioning for Growing Markets

Purchasing power

comparison of the relative cost of a standard set of goods and services in different countries more means greater growth potential the number and quality of companies that already compete in foreign markets
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Degree of global competition

©2004 by Nelson, a division of Thomson Canada Limited

Choosing an Office/Manufacturing Location

Qualitative factors
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Work force quality Company strategy Costs and barriers

Quantitative factors

©2004 by Nelson, a division of Thomson Canada Limited

22

World’s Best Cities for Business
United States 1. New York City 2. San Francisco 3. Chicago 4. Washington, D.C. 5. San Jose
Adapted from Exhibit 8.4 ©2004 by Nelson, a division of Thomson Canada Limited

23

World’s Best Cities for Business
Europe 1. London 2. Frankfurt 3. Helsinki 4. Amsterdam 5. Dublin
Adapted from Exhibit 8.4 ©2004 by Nelson, a division of Thomson Canada Limited

24

Minimizing Political Risk

Political uncertainty

Risk of major changes in political regimes Risk associated with changes in laws and government policies directed at businesses avoidance control cooperation
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Policy uncertainty

Strategies
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Becoming Aware of Cultural Differences

National culture
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power distance individualism masculinity/femininity uncertainty avoidance short-term/long-term

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Cultural Dimensions

Exhibit 8.5 ©2004 by Nelson, a division of Thomson Canada Limited

27

Preparing for an International Assignment

Language and cross-cultural training Consideration of spouse, family, and dual-career issues

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28

What Really Works
Cross-Cultural Training

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29

What Really Works

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30

What Really Happened?

Wal-Mart entered Brazil, Britain, and Germany Carrefour has been a strong competitor Increasing focus on local adaptation, but maintaining some global consistency
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©2004 by Nelson, a division of Thomson Canada Limited